Gambit Corporate Finance LLP’s Software and IT Services (SITS) Q323 M&A Market Review highlights the SITS M&A market resilience in Q323 and the optimistic outlook for Q423 and into 2024.
UK SITS M&A activity during Q323 was strong as volumes were 70% above the pre-pandemic levels of Q419.
Despite a 0.25% increase in the Bank of England base rate during the quarter, multiples have remained resilient at 14.9x in Q323, some of the highest multiples in the UK M&A market.
With a significant increase in the cost of capital during H123, there has been a noticeable shift in the allocation of private credit in the SITS market. Whilst there has been a decrease in the proportion of proceeds dedicated to financing leveraged buyouts, there is now a higher allocation towards funding ‘bolt-on’ M&A.
We expect SITS valuation multiples to improve in Q423 and into 2024, as inflation softens and interest rates plateau and start to retreat.
Innovative UK companies remain appealing to overseas acquirors, with an 11% increase in transactions in the UK involving EU purchasers in Q323.
SITS business owners should leverage the current ‘window of opportunity’ whilst the tax environment remains favourable, as Capital Gains Tax rules are potentially increased following the anticipated General Election in late summer 2024.
If you would like to arrange a call to discuss the opportunities facing your business or to understand the most appropriate solutions to support your shareholders’ needs and ambitions, please contact a member of the team.
To read the full report, click here.